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USD Coin (USDC) – Everything You Need to Know

With people looking for alternative methods of investment in order to earn more, it is not surprising that the crypto market has attracted a great deal of attention. There are plenty of opportunities that it has to offer and stablecoins are only one aspect that you will come across. People who want to save their profits during a bullish market are looking at stablecoins for protecting themselves against future price corrections and drops. You can find a range of stablecoins in the market and one of them that has gained a bit of prominence is the USD coin. Let’s take a close look at it:

What is US Dollar Coin? 

The first stablecoin that was introduced on the largest trading platform in the world i.e. Coinbase is the USD Coin (USDC). If you don’t already know, the term ‘stablecoin’ refers to a stable version of cryptocurrencies, which do not involve the inherent volatility that makes up the common cryptocurrencies. Every stablecoin is equivalent to a fiat currency, whether it is the Sterling Pound, Euro, or in the case of the USD coin, 1:1 with the US Dollar. 

The USD Coin runs as an ERC-20 token on the Ethereum blockchain. Every USDC token is legally backed 100% by a single USD, which is held in accounts that are open to regular public reserve reporting. The underlying technology that powers the USDC token was developed in collaboration between the Circle platform and the Coinbase cryptocurrency exchange

Background of the USDC

USDC’s history can be traced back to May 18, 2018, when the partnership between Coinbase and Circle, known as the Centre Consortium announced the launch of the US Dollar Coin due to a pool of investment fund valued at $110 million. The consortium had taken charge of the technology powering the stablecoin in the beginning, while Coinbase and Circle had been the first commercial issuers of the USD coin. The stablecoin was officially launched in September, 2018 and it gained a lot of popularity in the market. In fact, it ended up rivaling Tether, which is another stablecoin that’s pegged to the US dollar, and it took the number five ranking in terms of market capitalization in Coinmarketcap

The USDC token continued to expand and it was launched for trading in more than 80 countries in May of 2019. In 2020, when the world of decentralized finance (DeFi) began to rise, the USD Coin became vital to DeFi users. Similarly, the USDC token enjoyed another boost when Bitcoin began a bull-run in November 2020, as this drove a huge amount of traffic to it. 

Since it was introduced, the USD Coin has enjoyed a lot of success. As far as their transparency and regulation is concerned, you don’t need to worry about it. This is because of Circle, which is the platform that’s responsible for transmitting official money. Put simply, companies that are offering money services in the US are known as money transmitters. They have to comply with all federal rules, laws and regulations. Hence, the USD Coins are transparent, regulated, and completely verifiable. 

How Does USD Coin Work? 

Even though USDC tokens are actually backed by US dollars, it is not possible to print them and you cannot mine them like other common cryptocurrencies either. This is where tokenization can play an important role due to smart contracts (ERC-20 tokens). As far as the steps of the tokenization process are concerned, they are outlined as follows:

  • The first step is to meet the Know Your Customer (KYC) requirements and verification process. 
  • When this process is complete, the issuer will disclose a specific bank account where a wire transfer has to be made.
  • A smart contract is now used by the issuer for creating the amount of USDC you want. 
  • The USDC coins are provided and the US dollars backing them are put in reserve.

If you wish to trade USDC tokens for US dollars, all you have to do is just reverse the process. This can be done by sending a petition to the issuer of the USDC tokens to trade a number of them to USD. A smart contract is used by the issuer for exchanging a specific number of tokens to the US dollar. 

Institutional bodies in the US fully support and regulate USDCs, due to which all USDC issuers are required to provide their users with complete transparency, as they are working alongside these institutions. 

How Can the USD Coin be Used?

As stated earlier, the USD Coin is essentially an ERC-20 token that works with the Ethereum blockchain, which means that it is fully compatible with decentralized applications that are designed to support the ERC-20 standard. After you have registered your account on Circle and gone through the KYC verification process, the platform will give you a chance to use four main functions for your USDC tokens. These are tokenizing USD, redeeming USDC, depositing USDC from compatible wallets, and transferring it to ETH addresses that are compatible with the ERC-20 standards. 

The USD Coin also comes with some of the general uses that are associated with stablecoins, as compared to traditional fiat. These include working throughout destroyed or hyper-inflated economies, 100x leveraged trading, use in the decentralized finance space because various crypto products can be bought in dApps, sending money in a secure, low-cost, and instant manner, and avoiding financial institutions, except when you trade USDC to USD. 

What Makes the USD Coin Unique?

The USD Coin was able to make a name for itself in the crypto space because of the advantages it has to offer, as opposed to other stablecoins, along with the institutional power that has been added to it due to Coinbase and Circle. Banking the unbanked has become possible with USDC because you don’t need to have a proper bank account. It is also considered the answer to the democratization of international finance, all thanks to blockchain technology. As compared to traditional fiat money, it is easier and faster to carry out international transactions.  

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